I have been asked many times over the last few days about reporting of harmonized sales tax (HST) on GST/HST returns. One question was posed by a retailer who sells paintings across Canada. He said that in the month of July (so far) he has sold paintings (and delivered the paintings in Ontario, British Columbia and Nova Scotia. He has asked how he must report the GST/HST to the Canada Revenue Agency (CRA) on his GST/HST return.
My response is that he must add all the GST and HST together and report the combined amount on a single line of his GST/HST return. I will give an example to help explain:
This is an example that I have made up and does not use the numbers I have been given by any person. Let's assume we are already at the end of July for the purposes of my example. The painter sold the following paintings, to the following destinations, and has collected the following amounts of GST and HST:
|Painting||Destination||Value||GST Collected||HST Collected|
|Painting 1||British Columbia||$10,000||$500||$700|
|Painting 5||Nova Scotia||$10,000||$500||$1000|
The amount of GST/HST that must be reported on a single line on the painter's GST/HST return will be $8,100. For reporting purposes, it will make no difference how many sales were made in each HST province. The total combined GST/HST is reported on as a single number. Believe it or not (agree or not), the governments thought that this approach would be easier and a basis for selling the HST to businesses as a simple tax.
Many ask at this point how each province gets their respective HST. The payments to provinces go into a big pot of money and are allocated according to complicated formulas in the Comprehensive Integrated Tax Coordination Agreements (CITCAs) I will not bore you with the details.
One final point is that the supplier's records must be auditable. The CRA auditor will know the combined total and will ask how that number was determined. The details remain relevant and suppliers should keep records that are easy for the auditors (and then the audits are less painful for the suppliers).